Stock Market Volatility around National Election

Type of content
Publisher's DOI/URI
Thesis discipline
Degree name
Publisher
University of Canterbury. Department of Economics and Finance
Journal Title
Journal ISSN
Volume Title
Language
Date
2006
Authors
Bialkowski, J.
Wisniewski, T.P.
Gottschalk, K.
Abstract

In a sample of 27 OECD countries, this paper investigates whether the event of a national election induces higher stock market volatility. It is found that the country- specific component of index return variance can easily double during the week around the Election Day, which attests to the fact that investors are surprised by the actual election outcome. Several factors like narrow margin of victory, lack of compulsory voting laws, change in the political orientation of the government, or the failure to form a coalition with a majority of seats in parliament significantly contribute to the magnitude of the election shock. Our findings have important implications for the optimal strategies of risk-averse stock market investors and participants of the option markets.

Description
Citation
Bialkowski J., Wisniewski T.P., Gottschalk K., (2006) Stock Market Volatility around National Election. Auckland, New Zealand: 17th Asian FA/FMA Meeting: Bridging Finance Theory and Practice, 10-12 Jul 2006.
Keywords
political risk, national elections, stock market volatility
Ngā upoko tukutuku/Māori subject headings
ANZSRC fields of research
Fields of Research::35 - Commerce, management, tourism and services::3502 - Banking, finance and investment::350208 - Investment and risk management
Fields of Research::44 - Human society::4408 - Political science::440803 - Comparative government and politics
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